MTN returns to Eurobond market to fund growth

MTN Group Ltd. returned to the Eurobond market for the first time since 2014 as Africa’s biggest wireless carrier by sales seeks funds for investment.

The mobile-phone company is offering a five-year note at a yield ranging from 5.375 percent to 5.5 percent, according to a person familiar with the matter. MTN is also marketing a 10-year bond at about 6.5 percent, the person said, more than 80 basis points over the yield of its outstanding bond due in 2024.

“The initial guidance is quite generous, well over the existing bond, but there’s a lot of economic and regulatory uncertainty in both South Africa and Nigeria,” Richard Segal, a senior analyst at Manulife Asset Management in London, said by phone.

MTN’s bond sale comes after South Africa raised $3 billion in its biggest Eurobond offering, taking advantage of demand for emerging-market debt. The company is seeking funds for capital expenditure after the company reported its first-ever half-year loss, partly caused by an agreement to settle a 330 billion naira ($1 billion) fine with Nigerian regulators. The subscriber base of 233 million didn’t grow during the six months through June, while MTN is struggling to repatriate 15.4 billion rand ($1.1 billion) tied up in its Iran unit.

MTN total debt was 22.48 billion rand at the end of 2015, with a debt-to-equity ratio of 14.8 percent.

“The company has quite comfortable debt coverage ratios,” Alexandre Dray, a credit analyst at Gimme Credit in Tel Aviv, said in e-mailed comments. “MTN is thus ready to increase its cost of debt,” he said, estimating that the carrier could raise as much as $1 billion.